Cholamandalam Investment and Finance Company (CIFCL), part of $ 4.4 billion Murugappa Group, is planning to raise around Rs 500 crore through equity. The move is to fund its growth and to increase its Tier I capital to meet the proposed regulatory requirement.
Speaking to Business Standard, chief financial officer Arul Selvan said the fund raising would help future growth and also to meet if Usha Thorat’s Committee recommendation comes into effect.
Director of Centre for Advanced Financial Research and Learning (CAFRAL) Usha Thorat-led committee has recommended increasing the Tier I capital of non-banking financial companies to 12 per cent so as to reduce their risk to sensitive sectors.
“At present our Tier I capital is at 10.6 per cent and we need to increase it further, for which we may look at raising around Rs 300-500 crore,” said Selvan.
The company’s capital adequacy ratio (CAR) is around 18.19 per cent, more than what is prescribed by the regulator which is 15 per cent.
While declining to comment further on what were the equity routes, which the company might look at, he said, “we don’t want the money immediately, it will be happen over the period of time, but in less than three years.”
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In January, two private equity firms — Creador Capital and Multiples Alternate Asset Management — invested around Rs 212.08 crore in Cholamandalam Investment and Finance Company Ltd.
Besides equity, the company will also raise Rs 2,000-3,000 crore as debt to meet its disbursement target and to repay treasury maturity, said Selvan.
Commenting on the company’s new business vertical foray, he said, during the third quarter the company would start lending to affordable housing. “We are looking at lending to less than the Rs 25-lakh segment and focus areas would be Tier II and III cities. On the first year of operation, the company is looking at Rs 50-60 crore disbursement," he said. Post the housing segment, the company will enter SME and rural financing.
CIFCL reported a 75 per cent growth in net profit during the second quarter ended September 30, 2012, to Rs 69.70 crore as against Rs 39.73 crore, a year ago. Selvan attributed the growth to growth in asset book in the last one year, high interest cost, which was brought down, and also less tax provision against last year.
Total income rose to Rs 605.12 crore from Rs.412.80 crore in second quarter of 2011-12, registering a growth of 47 per cent. The growth was mainly due to vehicle finance, which rose 41 per cent to Rs 2,142 crore from Rs 1,700 crore and growth in home equity to Rs 500 crore from Rs 342 crore. Interest income was also high in the quarter, said Selvan.